PepsiCo CEO Warns Of Tariffs Led 'Increase In Supply Chain Costs,' Cuts Annual Profit Outlook

PepsiCo Inc PEP reported the first-quarter FY25 earnings on Thursday.

The food and beverage giant clocked a first-quarter FY25 sales decline of 1.8% year-on-year to $17.92 billion, beating the analyst consensus estimate of $17.77 billion.

Adjusted EPS of $1.48 missed the consensus estimate of $1.49.

Net revenue from PepsiCo Foods North America (PFNA) decreased by 1% year over year, PepsiCo Beverages North America (PBNA) remained flat, and International Beverages Franchise (IB Franchise) gained 3%.

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Latin America Foods (LatAm Foods) sales slumped 12% year over year, and Europe, Middle East and Africa (EMEA) and Asia Pacific sales slipped 2%.

Gross profit remained nearly flat at $9.99 billion, with a gross margin of 55.7%. Operating margin contracted by 40 basis points to 14.4%, and operating income for the quarter decreased 4.9% to $2.58 billion.

The company held $8.35 billion in cash and equivalents as of March 22. Cash used in operating activities for the quarter totaled $(973) million.

Chairman and CEO Ramon Laguarta said, "As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs. At the same time, consumer conditions in many markets remain subdued and similarly have an uncertain outlook."

Outlook FY25: PepsiCo cut its adjusted EPS outlook to $7.92, much lower than the estimate of $8.27 and a low-single-digit increase in organic revenue.

PepsiCo sees a core annual effective tax rate of approximately 20%.

The company expects total cash returns to shareholders to be approximately $8.6 billion, consisting of dividends of $7.6 billion and share repurchases of $1.0 billion.

Price Action: PEP shares are trading lower by 2.17% at $147.01 in premarket at the last check Thursday.

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